Manufacturing Drawback: How 1313(a) and 1313(b) Claims Work

Manufacturing drawback is a refund of up to 99% of the duties paid on imported materials that a company uses to make a product in the United States, when that product is later exported or destroyed. It is authorized by 19 U.S.C. 1313(a) and 1313(b) and filed in ACE under 19 CFR Part 190. Any manufacturer that imports inputs and sells finished goods abroad should check whether it qualifies.

What is manufacturing drawback?

Congress built drawback so U.S. manufacturers would not carry import duty into foreign markets. When imported steel becomes an exported machine, or imported chemicals become an exported formula, the duty paid on the inputs can come back. The claim follows the materials, so the manufacturer, the exporter, or another party in the chain can hold the right with the proper transfer records.

1313(a) direct identification vs. 1313(b) substitution

• 1313(a), direct identification: The exact imported material is traced into the exported article through lot numbers, batch records or a bill of materials. The refund is 99% of the duty paid on the material that was actually used.
• 1313(b), substitution: The manufacturer uses domestic or other duty-paid material of the same kind instead of the imported material. Under the Trade Facilitation and Trade Enforcement Act (TFTEA), the substituted material generally has to share the 8-digit HTS number of the imported material. The refund is limited to the lower of the two duty amounts.

Substitution matters because most plants do not segregate imported inputs from domestic ones. If the materials are interchangeable at the 8-digit level, the claim does not depend on tracking which unit went where.

Do you need a manufacturing ruling?

Yes. CBP will not pay manufacturing drawback until the manufacturer operates under a ruling that describes how imported materials become the exported product.

• General manufacturing drawback ruling: Published rulings cover common processes. A manufacturer submits a letter of notice to operate under one (19 CFR 190.7).
• Specific manufacturing drawback ruling: When no general ruling fits, the manufacturer applies for its own (19 CFR 190.8).

Plan for the ruling before the first claim. It is the most common reason a first manufacturing claim is delayed.

How much can a manufacturer recover?

Drawback returns up to 99% of the duties, taxes and eligible fees paid on the designated imports. Section 301 duties are eligible, which makes manufacturing drawback valuable for companies that import Chinese components. Antidumping and countervailing duties are excluded by statute. If production creates valuable waste, the claim has to account for it.

Deadlines and records

• Five years: The claim must be filed within five years of the date the designated merchandise was imported (19 U.S.C. 1313(r)).
• Production records: Keep the records that show the imported or substituted material was used in the exported article, such as bills of materials, production orders and inventory movements.
• Export proof: Commercial invoices, bills of lading or airway bills, and the export filing for each shipment.
• Retention: Keep the full file for three years after the claim liquidates.

Common mistakes in manufacturing claims

• No ruling in place: Claims sit unpaid until the ruling exists.
• Bill of materials gaps: If the BOM does not tie each input to each finished SKU, the claim cannot show usage.
• Wrong HTS match on substitution: An 8-digit mismatch disqualifies the substituted line.
• Ignoring the lesser-of rule: Substitution claims calculated on the higher duty get reduced by CBP.

Frequently asked questions

Is manufacturing drawback the same as a duty refund program? It is one of the drawback programs under 19 U.S.C. 1313. The others cover unused merchandise and rejected merchandise.

Can a contract manufacturer claim? Yes, with the right records. The drawback right can pass between the importer, the manufacturer and the exporter.

Can I combine manufacturing and unused merchandise drawback? Yes. Many companies claim unused merchandise drawback on goods they resell unchanged and manufacturing drawback on goods they transform.

How Caspian handles manufacturing drawback

Caspian is a licensed customs broker. We map your bills of materials to your ACE import history, prepare the ruling paperwork, match exports to eligible inputs under both direct identification and substitution, and file the claims. See our duty drawback services or read the full duty drawback guide.

Works Cited:

• 19 U.S.C. 1313, Drawback and refunds
• 19 CFR Part 190, Modernized drawback
• CBP: Drawback overview